May 03, 2004

Losing Our Economic Power

We are wasting hundreds of billions of dollars on a war in Iraq that is enflaming anti-American opinion and undermining our real security. Many on the anti-war left recognize that.

But what many even on the left don't fully recognize is what economists call the "opportunity cost" of wasting our public money on war. One obvious area is the systematic defunding of our once-dominant position in the sciences.

While federal money for research looks large, a majority is being diverted from basic research to military needs:

this year more than $126 billion has been allocated to research. Moreover, American industry makes extensive use of federal research in producing its innovations and adds its own vast sums of money, the combination dwarfing that of any other nation or bloc.

But the edifice is less formidable than it seems, in part because of the nation's costly and unique military role. This year, financing for military research hit $66 billion, higher in fixed dollars than in the cold war and far higher than in any other country.

While many people would argue that military research often is spun off to domestic applications, the basic fallback in scientific output by the US compared to other countries doesn't support that argument.

For instance, scientific papers by Americans peaked in 1992 and then fell roughly 10 percent, the National Science Foundation reports.

The numbers of new doctorates in the sciences peaked in 1998 and then fell 5 percent the next year, a loss of more than 1,300 new scientists.

One of the big problems is that while US government spending on domestic basic research is falling behind, corporate spending on science is being completely slashed, since they would rather concentrate on marginal improvements in existing products:

William Baumol, a professor at New York University, argues that big companies have been learning important lessons from the history of innovation. Consider, for example, that in general they have both cut back and re-directed their R&D spending in recent years. Gone are the droves of white-coated scientists surrounded by managers in suits anxiously awaiting the next cry of “eureka”.

The reality is that innovations like the Internet were the product of decades of basic research funded by the federal government from the 1960s into the 1990s. New economic growth will just increasingly migrate to other countries if we do not continually renew the skills driving basic innovation in our country.